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A bright 'red line:' What the White House won't do to woo GOP governors into Obamacare

Mario Tama / Getty Images

The Obama administration will bend Medicaid to woo Republican governors into Obamacare's expansion — but they're not going to break it.

That was the takeaway from the announcement Thursday that the White House had struck a deal with Pennsylvania to move forward on the Obamacare program, which will cover an estimated 300,000 Pennsylvanians.

Republican governors have used the Medicaid expansion as a moment of leverage, to ask the  Obama administration to agree to conservative Medicaid reforms they might not otherwise consider. Many have used the opportunity to make the public program look more like private insurance, with more choice of plans and monthly premiums.

"The administration is working very hard to come to agreement with Republican governors where they can," says Tevi Troy, president of the American Health Policy Institute and a former Health and Human Services official in the Bush administration. "Because they want people to sign up for the expansion...they're working pretty hard to make compromises."

And generally they've been successful — up until Pennsylvania Gov. Tom Corbett. He proposed tying Medicaid eligibility to employment, requiring enrollees to either be working or actively job searching.

The White House rejected that proposal, which would have been a marked change to how the public program works. And Corbett's experience gives a playbook to other Republican governors currently eying a Medicaid expansion about just how far the Obama administration will go to win their support.

Republicans and Obama are working together on Obamacare. Seriously.


(Stephen Lam / Getty Images News)

Since the Supreme Court made the Medicaid expansion optional in 2012, states that oppose Obamacare have used the moment to ask the Obama administration for waivers that allow them more flexibility in how they run their Medicaid programs.

These agreements give states permission to make changes to Medicaid that aren't otherwise allowed, like changing the benefits patients receive or allowing a private company to run their health coverage rather than the state.

Six governors — five Republicans and one Democratic, including Corbett — have petitioned the White House for waivers. A seventh, Tennessee Gov. Bill Haslam, announced he may do so later this month.

Arkansas and Iowa have pursued Medicaid expansions that enroll patients into private health insurance, with premiums paid by public dollars. This flexibility did exist prior to Obamacare, but states had barely used the option until conservative states were looking for more palatable ways to grow an entitlement program.

"We've always had this concept of premium assistance as an option," says Joan Alker, who runs the Center for Children and Families at Georgetown University. "But with the Medicaid expansion waivers, states are taking it in a whole new direction."

Medicaid beneficiaries in these states can shop on the health exchange just like people buying coverage. They enroll in the same plans, and receive the same ID cards in the mail — making the Medicaid experience much more like the individual market. Between the three states, there could be 648,000 people eligible for this newly-privatized version of Medicaid.

States have increasingly pushed the limits of this so-called "private option." Arkansas, which pioneered the approach, guarantees Medicaid enrollees access to some of the benefits that aren't usually part of private insurance, like paying for rides to the doctor.

Iowa's expansion plan, approved by the Obama administration in December, relieves the state of the traditional requirement to cover non-emergency transportation — meaning that Medicaid enrollees there will have a slightly less robust benefit package as a result of the state waiver.

Making Medicaid more like private insurance


Michigan's Republican Gov. Rick Snyder wants to add health assessments to Medicaid. (Bill Pugliano / Getty Images News)

Other states are looking at different approaches: Michigan, for example, wants to administer an annual health assessment as a condition of expanding Medicaid. Under that approach, Medicaid enrollees would have to provide information about potential medical risks.

Those assessments could potentially be used in some type of incentive program, much like employers have increasingly given financial rewards to workers who participate in healthy behaviors like going to the gym or joining a smoking cessation program.

In Indiana, Gov. Mike Pence has asked for a waiver to expand Healthy Indiana, a program started in 2008 to expand coverage to about 40,000 low income Indiana adults. Approved by the Bush administration, Healthy Indiana pioneered some of conservatives' favorite health policy approaches in Medicaid. It created health savings accounts that all Healthy Indiana enrollees would have to contribute a monthly premium into — or, like in private coverage, have their coverage cancelled if they don't.

Pence's plan to expand Medicaid in Indiana would put an additional 350,000 people into the Healthy Indiana Plan, with a similar structure for premium contributions. It would, by far, be the broadest use of health-savings accounts in the Medicaid program — so broad that Pence wasn't initially sure the White House would sign off.

"My first objective was I wanted to preserve the Healthy Indiana Plan," Pence said on a recent trip to Washington. "Frankly, in the wake of the 2012 elections, there were some who speculated we wouldn't be able to do that...there was a lot of skepticism about whether the administration would be willing to extend a waiver."

Not everything is on the table


As a member of Congress, Pence voted to repeal Obamacare. (Chip Somodevilla / Getty Images News)

The Obama administration hasn't signed off on all the changes that Republican administrations have requested. Medicaid is meant to be a safety-net program and certain changes — like putting a cap on how many people can sign up, for example, or significantly increasing enrollees costs — are unlikely to get federal sign-off.

The Pennsylvania experience is the starkest example of that, as the Obama administration starkly rejected Corbett's proposal to tie Medicaid eligibility to a beneficiary's employment status. That would be a huge change to the Medicaid program: right now, the only requirement enrollees must meet is earning below a certain cap. No state has ever tethered eligibility for the program to a particular behavior or action on the part of the enrollee.

The White House has also rejected Iowa's proposal to charge a small premium to everyone who earned more than 50 percent of the federal poverty line (about $5,500 for an individual) out of concern those payments would be too onerous for the lowest-income beneficiaries.

"Everybody has red lines," Troy says. "Republicans and Democrats have some different priorities and they need to figure out which ones match up."

Pennsylvania didn't walk away totally empty-handed: they did get permission to charge premiums to some of the higher earning enrollees (individuals making more than $11,170 annually). Those beneficiaries will have the opportunity to reduce their premiums by participating in job search programs — a hugely scaled down version of the big, sweeping change that Corbett initially proposed.

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